Chase v. Allen

Bigelow, J.* The determination of the question, whether a sum named in a contract, to be paid for a breach, is to be regarded as a penalty,or as liquidated and ascertained damages, depends not so much on the form or language of the contract, as upon its subject matter, and the nature of the covenants or agreements, for a breach of which the damages are stipulated to be paid. Hodges v. King, 7 Met. 583. Mayne on Damages, 68. The rule of construction applicable to such stipulations is now well settled. Where a party agrees to pay a certain sum in case he fails to perform any one of divers acts which are of different degrees of importance, and which are capable of being estimated and measured in money, the sum named as damages is to be treated as a penalty ; but if the contract consists of several stipulations, the damages for a breach of which cannot be well ascertained and valued, then the parties are deemed to have [46] intended that the sum agreed on shall be treated as liquidated damages, from which there is to be no deduction. Green v. Price, 13 M. & W. 701, 702, and 16 M. & W. 346. Atkins v. Kinnier, 4 Exch. 783. Curtis v. Brewer, 17 Pick. 513. Heard v. Bowers, 23 Pick. 455. The case at bar clearly falls within the latter branch of this rule. The subject matter of the contract is such as to render it quite impossible to form any estimate of the damages occasioned by a breach of its stipulations. No standard by which the damages can be measured is furnished by the contract itself, nor would extrinsic evidence afford any means by which they could be accurately or even approximately ascertained. The persons who subscribed to the fund to aid the defendant in erecting a hotel were prompted to do so by the expected benefit which would thereby accrue to them respectively by enhancing the value of their real estate, and by increasing the business in that part of the city of Worcester. It is obvious that the damages which each would sustain by the loss of this anticipated benefit are peculiarly uncertain and difficult of estimation in money. This is therefore one of those cases where it must be presumed that the parties stipulated for the payment of a fixed sum of money absolutely, from the difficulty of ascertaining any exact amount of damage which would be sustained by a breach of the agreement. We have no doubt that the bond declared on was intended as a substitute for the agreement by which the defendant, on receiving the amount of the first subscription, agreed to pay damages to each of the subscribers, in case of a failure to fulfil the contract on his part. The defendant cannot therefore be held liable to the same persons on both agreements. Those only can claim damages in this action who have not settled with the defendant and released their claims, and who shall elect to waive their claims to damages under the first contract. Judgment for the plaintiff. Footnotes [*] Merrick, J. did not sit in this case.